A former market darling, Blackmores Limited (ASX:BKL) has dropped off the radar of most investors recently. After trading around $220 in early 2016, the Blackmores share price is currently floating around the $77 mark.
Despite the coronoavirus pandemic impacting the company's Chinese operations, it has renewed interest in inner health, with consumers flocking to stock up on immunity products. As a result, I believe the Blackmores share price is poised to soar again.
Immunity products in high demand
Management from Blackmores have reported that the coronavirus pandemic has increased demand for key immunity products in Australia and abroad. Supplements such as vitamin C have been flying off shelves, as consumers look to extend their pantry hoarding to health products.
With operations in China resuming, Blackmores has confirmed it is able to meet consumer demand, especially with the Australian flu season approaching. The company forecasts a big opportunity in the immunity space post-pandemic, following a permanent shift in the mindset of consumers.
Late last year, Blackmores took control of its Braeside manufacturing facility in Melbourne to get more control of production and supply chain. As the company transitions into operations, it will reduce extra costs and reliance on outside contractors for vitamin production.
How has Blackmores performed during the pandemic?
Blackmores was one of the first companies that started to feel the impacts of the coronavirus pandemic. The company's important operations in China were halted when the country went into lockdown earlier this year.
In mid-February, the company released an update informing shareholders that profit downgrades were to be expected as a result of the disruptions caused by the coronavirus. Blackmores reported net profit after tax for the first half of FY20 of $18 million, a 47% decline from the prior corresponding period and a 5% drop in revenue of $303 million. The company also scrapped its first-half dividend as a result of the slump in profits.
The Blackmores share price is currently 9% lower for the year, after posting a recovery of more than 28% from its lows in mid-March.
Should you buy?
Although supplements like vitamin C only make up approximately 10% of overall revenue, Blackmores could be poised to benefit from renewed consumer interest in the health of their immune system. However, I don't think it would be prudent for investors to rush ahead and buy shares in the company just yet.
The company looks to expand its operations overseas and having full control of its vitamin factory, which will put Blackmores in good stead to capitalise on growth opportunities. I think it would be wise for investors to compile a watchlist of companies that could benefit from tailwinds in a post-coronavirus world and wait for positive price action.
